More In This Article

SHENYANG—Rows of new white minibuses marshal at the entrance to Brilliance Auto's sprawling complex on the outskirts of this industrial city of 4.2 million people in northeastern China. The complex includes assembly shops, dormitories and corporate headquarters, in addition to temporary parking for the company's products. In one cavernous, dimly lit shop, workers in tan overalls with blue highlights repeat over and over the same basic assembly task as a conveyor belt slowly but steadily carries the skeletons of future minibuses from station to station at the pace of the slowest worker. The air is filled with brief blasts of whirring power tools and the smell of ozone and rubber. Everywhere is the logo of Brilliance, a blocky knock-off of the oval symbol of the world's largest automaker Toyota.

The logo is perhaps an homage to the mammoth company whose partnership with Brilliance has helped it to shine, along with additional help from BMW. The Chinese state-owned enterprise now sells some 80,000 "JinBei" and "Granse" minibuses a year—after assimilating Toyota's "Hiace" and "Granvia" minibus models during a previous joint venture, or what the Chinese call technology "digestion."

"At the beginning, we had no ability to develop our own vehicles," says Wang Shiping, Brilliance's vice president of strategy, via a translator. "Now we just purchase engines from Toyota. We have two engine plants but it's the customer's choice: if they like Toyota engines we provide that. If they like domestic we have that."

Much like the U.S. or neighbors Japan and South Korea, China has made automobile manufacturing a focus of its development efforts—naming it a "national pillar industry" in 1994. Brilliance's parent company—Huachen—employs some 35,000 people. And much like Henry Ford introduced an economic model that worked for America—building cars that his workers could afford on the salaries he paid them—the Chinese public has responded, purchasing roughly 14 million vehicles in 2010 and lifting the global fortunes of automakers both domestic and foreign, such as GM, which, for the first time in 2009, sold more cars in China than in the U.S.

At the same time, China has invested heavily in infrastructure to make the country car-friendly: roads, bridges, tunnels—an orgy of construction that happens to double as a stimulus plan. A pristine four-lane toll highway leads out of this northeastern city, empty except for a few trucks and official convoys speeding past in their specially licensed black sedans. But within a few years, the lanes will be crowded with cars and the next cycle of road-building will begin. Beijing started its second ring road in the 1980s and completed its sixth—stretching 187 kilometers around the sprawling capital—in 2009.

Predictable results have followed: traffic jams that stretch for kilometers, sprawling suburbia and rising fuel prices. The vice mayor of Beijing was recently "exiled" to work in Xinjiang province after a debacle of some 30,000 vehicles being registered in a few weeks in December in anticipation of a curb on new auto registry. The Beijing municipal government duly laid out its plan on December 13 to combat the capital's roughly 4.8 million vehicles that have turned the city's roads into sinuous parking lots, including encouraging the use of the new subway system and restricting new vehicle registries to just 240,000 in total next year, roughly one-third of 2010's total. Plus, a haze covers the cities of China—a combination of the smoke of a million coal fires and all the vehicles' exhaust obscuring the skyline with smog's airlight, turning a Beijing sunrise from rosy to peach.

"China, India, can those countries do it better?" asks transportation expert Daniel Sperling of University of California, Davis. "Do they have to follow the model of the U.S. and Europe?"

In 2010, the world holds some 1.2 billion cars, trucks, buses and motorcycles, including roughly 200 million in China. But with China potentially heading towards a billion vehicles alone in the next few decades the question is: can China build the clean car of the future or will it remain stuck in the muck and mire of the past?

"The industry and the market are going to smaller, cheaper vehicles, not just China and India, but elsewhere as well," Sperling notes, and tax cuts on cars with less than 1.6 liter engines helped push sales of such vehicles to 70 percent of the Chinese market this year. But, even with cars moved by such fuel efficient engines, "if you think we have problems now with oil security and climate change, it's only going to get a lot worse unless we do something about the increasing number of vehicles."

All of oil
Since the dawn of the Oil Age more than a century ago, humanity has produced (and burned for the most part) roughly 1 trillion barrels of oil. As it stands, half the oil used worldwide—86 million barrels per day—is burned in motor vehicles. "To the extent there's an oil problem, it's really a transportation problem," Sperling says, because most of the oil is used to transport people or goods.

And much of that transportation problem can be traced to China, where at least 2,000 new cars hit the streets of the capital city Beijing every day. "China's increase in oil demand [between 2000 and 2007] was equal to all of Saudi Arabia's production," notes Mikkal Herberg, an expert on energy and Asia at the University of California, San Diego, and two-thirds of the country's imported oil came from the Persian Gulf region. China's National Development and Reform Commission (NDRC), the government agency that sets Chinese energy and industrial policy, says the country relies on imported oil for 55 percent of its supplies, or more than 4.2 million barrels per day out of a more than 8 million barrels per day habit.

In Shenyang and Beijing, gas costs roughly 6.72 renminbi per liter ($3.85 per gallon) this autumn. But that price is changing. As a result of rising global oil prices and ongoing billions of renminbi losses at the quasi-governmental Chinese oil companies, the NDRC raised fuel prices on December 21, adding roughly 0.23 renminbi to the retail price per liter in a bid to spur conservation.

That conservation is needed to preserve China's energy independence, according to NDRC vice chairman Zhang Guobao. Outside of the Middle East, much of the world's production of oil has peaked. "Eighty percent of the world's known, proven, easily produced reserves is where access is completely unavailable or very constrained and limited," Herberg notes.

But there's still plenty of oil out there, as much as 4.5 trillion barrels if "unconventional" oil—oil from tar sands, heavy oil deposits or oil shale—is included. And there's even more if we start converting other fossil fuels into liquid fuel. China already has one such coal-to-liquid fuel plant and may build more. "If we're worried about greenhouse gases, this is exactly the wrong way to go. This is recarbonizing our energy system," Sperling says. "We need to meet people's [transportation] needs in a way that doesn't destroy the Earth."

China's national oil companies— China National Petroleum Corporation, China National Offshore Oil Corporation and Sinopec—have invested in oil fields around the world, in a bid to ensure future supply. "Oil is too important to be left to the market," Herberg notes. "The critical issue is not who drinks out of what piece of the lake. The critical piece is is there enough water in the lake, enough oil in the market?"

China is doing its part, attempting to build a strategic stockpile of 20 days' worth of imports—similar to the 90 days of imports stockpiled by all countries that are members of the International Energy Agency, essentially an anti-OPEC for oil consumers. "IEA has enough stocks collectively to put 4 million barrels-per-day on the market in case of a severe disruption," Herberg says. "That's an enormous amount of oil."

And then there are the alternatives. "The future of fuels is some mix of biofuels, electricity and hydrogen," Sperling says. "That's almost 100 percent definite." And electric vehicles are leading that charge.

Electric future?
Chinese companies have already produced some 120 million electric bikes—regular bicycles with an electric motor and rechargeable battery attached—a convenient form of transportation that is underused in the U.S. These small companies, such as Xinri, are graduating to building four-wheeled electric vehicles, similar to the Nissan LEAF, joined by Chinese battery makers like BYD, which stands for Build Your Dream. "Electric vehicles is a way they can leapfrog conventional technology," Sperling says. "The future of vehicles is moving toward electric drive."

The Chinese government has supported the infant EV industry since 2006 as part of its 863 Program for advanced technology development. "It's a top priority," Sperling says. "This is a way to reduce oil imports, which is a big deal for them, and a way to develop an export-oriented auto industry." China already exports some conventional vehicles—Brilliance expects to ship out some 40,000 vehicles in 2010, despite crash test setbacks in Europe in which Brilliance sedans folded like origami on impact.

But it is electric vehicles on which China is hanging its future, eliminating tax cuts for small internal combustion engine vehicles and investing more than $15 billion government money in a fund for carmakers, utilities and oil companies to invest in electric and other "new energy" vehicles over the next decade. And the Chinese government will formally reveal its plan for "Energy Saving and New Energy Vehicle Development" this month, which will prioritize hybrid and electric vehicles, aiming for 1 million such autos on the roads by 2015.

Already, 16 state-owned enterprises, including automakers China FAW Group and Dongfeng Auto, have been ordered to build the electric vehicle industry in the country with a goal of becoming the number one producer of such vehicles by 2012. And Chinese central and local governments offer hundreds of thousands of renminbi in subsidies to manufacturers of electric cars. "If we fail to catch this trend, it will be hard for us to survive in future," says Brilliance's Wang.

The only problem is the Chinese consumer; hybrid vehicles that pair a gasoline and electric engine, let alone pure electric vehicles, are too expensive for the first-time Chinese car buyer. For example, a Toyota Prius costs roughly 200,000 renminbi—more than twice comparable cars with only an internal combustion engine that runs on gasoline. "The high cost of new energy vehicles make the vehicles difficult for consumers to accept," Wang says, though the company has sold 400 such hybrid electric vehicles for use as taxis in the Chinese city of Dalian, thanks to government subsidies.

The technology is also not up for comparison with the venerable internal combustion engine: a pure electric vehicle requires one kilogram of battery to support one kilometer of travel, making a car with the typical range of a conventional vehicle prohibitively heavy. And surmounting that hurdle with lighter-weight batteries employing lithium-ion technology adds yet more to the cost of the final vehicle. "Even if we can tolerate the heavy weight of the battery, we will not be able to tolerate the premium of price [over the cost of a comparable conventional vehicle], which ranges from 50,000 to 60,000 renminbi per unit," Wang notes, though the Chinese government now offers a subsidy of 60,000 renminbi to buyers of electric vehicles in five chosen cities and 50,000 renminbi to buyers of hybrid cars.

Simply put, electric vehicles remain too expensive for the average car buyer. And what holds for China probably holds for the rest of the world. The Chevrolet Volt, for example, is roughly $40,000 in the U.S. before government incentives—roughly twice as much as a comparable sedan with an internal combustion engine.

It remains to be seen how electric cars will fare upon their reintroduction this time; it is possible that EVs can help the world's car drivers reduce their oil consumption—and reduce the emissions of heat-trapping gases. After all, electric cars dominated the early history of automobiles because of their ease—Mrs. Henry Ford drove one—until the abundance of oil and its power density displaced them from the marketplace (while incorporating them as electric starters for internal combustion cars). "The goal is to make these cars more affordable than the gasoline counterpart," says Julie Mullins, a spokeswoman for Better Place, a purveyor of electric vehicle infrastructure. "If it's not more convenient and it's not more affordable, then consumers will not make the switch."

And, as of today, electric cars are neither more convenient, nor more affordable. "I have no confidence in electric vehicles amounting to a hill of beans in the next five years or 10 years. The batteries are lousy," says Mark Levine, a senior staff scientist at Lawrence Berkeley National Laboratory in California, who has worked with the Chinese government on energy efficiency programs since 1986, though he notes that "the Chinese do miracles…. China will be dominant in electric vehicles and will probably take over the world market [in 2025 when the technology matures] unless other countries are willing to subsidize their own production."

He adds: "It's just not going to happen overnight."

At the same time, simply switching Chinese drivers from burning oil to using electricity that is created by burning coal—responsible for more than 70 percent of such power presently in the Middle Kingdom—may not reduce greenhouse gas emissions enough. "Electric vehicles only make sense if you are also committed to decarbonizing electricity," Sperling notes.

And globally, it will take a long time for electric vehicles to displace the internal combustion engine. "It would take until 2029 to swap to all electric vehicles if all new vehicle sales from today forward are electric vehicles," notes chemical engineer David Rogers, general manager for climate change at California-based oil company Chevron, and until 2089 if only 25 percent of new vehicle sales were electrics. The Toyota Prius and cars like it—hybrid electric vehicles, which rely on conventional motors in conjunction with electric ones—grew to only as much as 5 percent of new vehicle sales in the last 10 years. "This thing is going to take a long time."

It may be buses and taxis that lead the charge, given their circumscribed routes and return to fixed locations. "Buses are big enough to hold batteries," Wang notes, and they are largely purchased by big-pockets governments rather than ordinary citizens.

One thing seems clear: most driving will be done with internal combustion engines, at least for the near future, whether in China, the U.S. or elsewhere. "Under current conditions, only 1 to 2 percent of Chinese consumers are willing to buy hybrid vehicles," Wang says. "Consumers are not yet ready to be willing to pay for the environment out of their own pocket."

Editor's Note: Reporting for this feature took place as a result of a Jefferson Fellowship from the East–West Center in Honolulu, Hawaii.